Contract:
Contract is a written document that creates legal enforcement for buying and selling the property. It is committed by the parties to performing their obligation and enforcing their rights.
The revenue recognition principle:
The revenue recognition principle refers to the revenue that should be recognized in the time period, when the performance obligation (sales or services) of the company is completed.
IFRS:
The International Financial Reporting Standards (IFRS) are issued to have a common language for business affairs globally, to ensure easy understanding and comparing the financial statements across the boundaries of the countries. These IFRS are issued by the IFRS Foundation and the International Accounting Standard Board.
To determine: The amount of recognized revenue under IFRS.
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INTERMEDIATE ACCOUNTING
- Question 3. Classify each of the following accounts as (a) asset, (b) liability, or (c) equity. a.→Defined benefit obligation b.→Plan asset c.→Right-of-use asset d.→Contract asset e.→ Unearned revenue f.→ Deferred tax asset g.→Accumulated other comprehensive lossearrow_forwardWhich of the following statements is not applicable to contract acquisition costs under ASC Topic 606 guidance for revenue recognition? Incremental costs of acquiring a contract must be capitalized and amortized over the life of the contract. Costs that would be incurred regardless of whether a contract is obtained are not capitalized. The capitalization requirement is subject to a practical expedient. Costs must be capitalized even if the amortization period is one year or less.arrow_forward1. Under PFRS 15, how shall revenue from contracts with customers such as revenue from initial franchise fee be recognized by the franchisor? a. Upon receipt of the initial franchise fee by the franchisor. b. Upon signing of the franchise agreement. c. When the franchisor satisfies the performance obligation under the franchise agreement. d. Applying the legality over the substance of the transaction. DED g 15arrow_forward
- The new standard, Revenue from Contracts with Customers, recognizes revenue based on a(n): Revenue-Expense Approach Asset-Liability Approach O Asset-Equity Approach O Liability-Equity Approacharrow_forward_____ is a contract that involves compensation for specific potential future losses in exchange for periodic payments and that provides for the transfer of the risk of a loss, from one entity to another, in exchange for a premium. a.Spot contract b.Insurance c.Hedging d. Forward contractarrow_forwardTRUE OR FALSE 1. PFRS 4 SUPERSEDES PFRS17 2.PFRS 17 APPLIES TO REINSURANCE CONTRACTS3.INCOME SERVICE IS RECOGNIZED IN OTHER COMPREHENSIVE INCOME4. PFRS17 APPLIES TO INVESTMENT CONTRACTS WITH DISCRETIONARY FEATURES REGARDLESS IF THE ENTITY ALSO ISSUES INSRANCE CONRACS OR NIarrow_forward
- Question: Classify each of following items as a contingent liability, a provision or neither: (e) an agreement to act as guarantor for another firm’s borrowings? (f) environmental damage that an entity has undertaken to repair ? ******correct answer please **********arrow_forward1 Under IFRS 15, an entity recognizes revenue from contract with customers when or as the entity satisfies the performance obligation. Any of the following criteria is considered satisfaction by an entity of performance obligation over time, except Group of answer choices a. The entity has already transferred the control, title, and risk/rewards of ownership of the asset to the customers upon delivery of the asset b. The customer simultaneously receives and consumes all of the benefits provided by the entity as the entity performs c. The entity’s performance creates or enhances an asset that the customer controls as the asset is created. d. The entity’s performance does not create an asset with an alternative use to the entity and the entity has an enforceable right to payment for performance completed to date.arrow_forwardS1: Zero Profit Method in revenue recognition principle recognizes income upon the completion a construction contractS2: A contract asset exists when Contract revenue to date is less than progress billings to date Both are true Both are false S1 True S2 True explain and cite your source.arrow_forward
- 1. Should the two contracts be combined for purposes of applying the five-step revenue recognition model? 2. What amount of revenue should Panarin associate with each of the contracts? 3. When should revenue be recognized on each of the contracts?arrow_forwardRequired A 1. Record the sales agreement. 10.01.2020 2.Record entry for forward contract entered into by Mertag Company. 10.01.2020 3. Record the forward contract and recognize the change in fair value. 12.31.2020 4. Record the firm commitment and recognize the change in fair value. 12.31.2020 5. Record the entry to adjust the fair value of the forward contract. 01.31.2021 6. Record the entry to adjust the fair value of the firm commitment. 01.31.2021 7. Record the sale and receipt of PLN. 01.31.2021 8. Record settlement of forward contract. 01.31.2021 9.Record entry to close the firm commitment. 01.31.2021 Required B Determine the net benefit, if any, realized by Mertag from entering into the forward contract. (Do not round intermediate calculations. Negative amount should be entered with a minus sign.) Net benefit:arrow_forwardTrue or false: FASB ASC 606 states that an entity must separately disclose revenue from contracts with customers. O True Falsearrow_forward
- Auditing: A Risk Based-Approach to Conducting a Q...AccountingISBN:9781305080577Author:Karla M Johnstone, Audrey A. Gramling, Larry E. RittenbergPublisher:South-Western College Pub